But if you hold your bitcoins for over a year—no capital gains tax!

In response to a query by a member of parliament, the German Finance Ministry has declared (Google Translate) that it accepts bitcoins as a “unit of account.” The Ministry added that bitcoins are a sort of “private money” and that mining bitcoins constitutes “private money creation.”

The Ministry also clarified that if a German taxpayer holds bitcoins for more than a year, she is exempt from paying the 25 percent capital gains tax. Such a tax would ordinarily be paid after profiting from the sale of a stock, bond, or other security. However, taxpayers are now required to pay taxes on any profits made from Bitcoin transactions that happen within a year.

How would the Finance Ministry even know if a taxpayer holds bitcoins? The taxpayer would be expected to declare them as part of her assets and income as part of her annual tax return.

The German lawmaker, Frank Schäffler—a member of the Free Democratic Party (FDP), a pro-business, center-right party—wrote on Twitter that famed Austrian economist Friedrich Hayek would be happy with this decision. Hayek was an early 20th century scholar who argued forcefully for mostly laissez-faire economics. That view was in contrast to another economic giant of the era, John Maynard Keynes, who believed government spending could help steer a national economy in the right direction. (Their debate is best summed up in this rap.)

Hayek, a “classical liberal,” had a profound impact on political and economic decisions of major conservatives politicians of the 20th century, including former US President Ronald Reagan and the late former British Prime Minister Margaret Thatcher. (In an American political context, Schäffler could be considered as a libertarian today.)

Earlier this month in the US, New York state regulators subpoenaed 22 Bitcoin-related companies, and a United States Senate committee wrote a letter (PDF) to the Department of Homeland Security asking for “policies, procedures, guidance, or advisories” pertaining to Bitcoin."

The letter from the Senate Homeland Security and Government Affairs Committee—dated Monday, August 12, 2013 but published on its website on Tuesday—cites an ongoing case in Texas involving Bitcoin Savings and Trust (BTCST). The BTCST was a virtual Bitcoin-based hedge fund that many suspected of being a scam. Earlier this month, a federal judge declared Bitcoin a “currency” and subject to relevant financial regulations.

Cyrus Farivar
Cyrus is a Senior Tech Policy Reporter at Ars Technica, and is also a radio producer and author. His latest book, Habeas Data, about the legal cases over the last 50 years that have had an outsized impact on surveillance and privacy law in America, is due out in May 2018 from Melville House. He is based in Oakland, California. Emailcyrus.farivar@arstechnica.com//Twitter@cfarivar